The year 2024 was a pivotal for Tier 2 cities real estate, as they emerged the economic growth centres and real estate hotspots, fuelled by government initiatives, infrastructure development and affordable housing demand.
The Pull Factors
Urban infrastructure development is a key trend driving the real estate sector in Tier 2 cities. Government initiatives such as Smart City Mission, PMAY, and the Atal Mission for Rejuvenation and Urban Transformation (AMRUT) are playing a significant role, with major investments in roads, highways, public transportation, and even regional airports. These improvements enhance connectivity within these cities and link them to larger urban centres, making them far more accessible and appealing to prospective residents.
The abundance of affordable land, coupled with significant investments in connectivity infrastructure and robust demand, has spurred a surge in luxury and premium housing supply in these cities. Both established developers and new entrants are capitalizing on the vast potential of these cities as growth centres and employment hubs, poised to drive India’s next phase of growth.
Tier 2 cities offer a lucrative investment proposition, combining lower entry barriers with higher growth prospects, making them an attractive alternative to the increasingly saturated Tier 1 markets.
As per PropEquity, “Tier II cities have seen renewed interest from developers, corporates, financial institutions and investor community. The cheap availability of land in these cities followed by massive development of connectivity infrastructure and strong demand have led to increased supply of premium and luxury housing from not just incumbent developers but new entrants cashing in on the potential of these cities as growth centres and employment hubs driving the next phase of India growth story.
Cities like Jaipur, Guntur, Gandhi Nagar and Bhubaneshwar have seen price rise between 15-65% in the last one year. In North India, Indore saw 20% rise in weighted average price of new launch projects and Dehradun 14%. While Agra, Chandigarh and Bhiwadi saw 59%, 34% and 25% growth in prices respectively, the new launches in these cities were very few (between 3-5 projects) during this period. The weighted average price of new launch projects rose by 14% in Surat and 12% in Nagpur.
A recent survey reveals that the weighted price of new launch projects in top 30 tier II cities rose up to 65% between 2023 and October 2024 with 26 cities witnessing a rise in prices. Cities like Jaipur, Guntur, Gandhi Nagar and Bhubaneshwar have seen price rise between 15-65% in 2024.
Top 5 TIER 2 CITIES Of 2024
Jaipur: In North India, Jaipur witnessed a staggering 65% surge in property prices, with rates skyrocketing from Rs 4,240 to Rs 6,979 per sq ft. The Pink City meta- morphosis into a contemporary urban hub while preserving its rich heritage is driven by the state government’s proactive initiatives, influx of private investments, and strategic infrastructure developments.
Guntur: In the South, it is Guntur that saw weighted average price of new launch projects rise by 51% to Rs 5169 per sq. ft. between 2023 and October 2024 followed by Mangalore (41%), Visakhapatnam (29%). Guntur, a thriving city in Andhra Pradesh is drawing investors seeking profitable opportunities. With rising urbanization, demand for residential & commercial properties in Guntur is steadily rising.
Gandhi Nagar: Gandhi Nagar, capital of Gujarat in Western India witnessed a significant 19% increase in weighted average prices of new launch projects, reaching Rs 4,844 per sq ft between 2023 and October 2024. Gandhinagar has emerged as a power-house on the global financial map with GIFT city majorly contributing to the price rise.
Bhubaneswar: In East, Bhubaneswar, the capital and the largest city of Odisha recorded 15% jump in new launch prices to Rs 7,731/sqft, following closely, Raipur saw 14% rise to Rs 3,810/sqft between 2023-2024. Bhubaneswar’s real estate resurgence can be attributed to the government’s 2020 policy changes, which relaxed FAR norms, encouraging builders to plan more residential projects and prompting Odisha natives working outside the state to invest in property.
Goa: Goa emerged as the only tier-II city with average launch price surpassing rs 10,000/ sqft. Beyond luxury and beachfront properties, interest in Goa now spans expansive gated communities, drawing investment capital from across India. Goa, has become a top preference for urban professionals looking for a different kind of lifestyle.
Trending Temple Towns
Spiritual tourism is ushering in a new era of real estate opportunity. As the growing influx of tourists is driving the real estate developments the religious cities, these places have emerged as frontrunners of investment opportunities in India. Religious tourism is driving residential demand in Tier-2 markets, with Prayagraj, Varanasi, Puri, and Shirdi emerging as hotspots. These cities have seen significant YoY increases in demand, ranging from 18% in Varanasi to 67% in Shirdi.
Buyers are investing in these markets not only for self-use but also for long-term gains, holiday homes, and converting them into BnBs (bed and breakfast). Residential pric- es in these cities offer compelling value, with Vara- nasi at Rs 6,128 psf, Prayagraj at Rs 6,645 psf, Puri at Rs 6,114 psf, and Shirdi at Rs 4,028 psf, making them attractive investment opportunities.
Tier 2 Cities: Retailers Haven
India’s Tier II and III cities are poised for a retail revolution, with 25 million sq. ft of new retail space expected by 2029, driven by growing consumer demand and developer interest. Institutional investors and developers are capitalizing on lower land costs and growing consumer aspirations, with over 30% of institutionally held retail assets now located in Tier II and III cities. One major reason of this boom is there is the availability of quality retail space, as developers are launching large malls in these locations to meet the robust demand.
North India dominates the upcoming retail supply in Tier II and III cities, accounting for 44% of the total and Southern India has a share of 30%. Average mall size projected at 375,000 sq. ft, with four projects exceeding 1 million sq. ft. in tier II and III cities.
Top 5 Trending Religious Cities
Ayodhya: According to an estimate, the real estate prices have risen by over 25-30% since the Supreme Court verdict.
Varanasi: Residential property prices in Varanasi have reduced by 5.15% due to increasing supply, to reach an average rate of INR 6,128 psf.
Prayagraj: The city property prices escalated by 122% between January and March 2024 due to high demand. However, since then prices have rationalized and have decreased to INR 6,645 psf.
Puri: Prices in Puri for residential properties have appreciated 30% in the past one year to INR 6,114 psf, making it a compelling value proposition city.
Shirdi: The city witnessing a surge in buyer interest has seen 67% rise in residential property prices.
Top Tier-II Retail Cities Of 2024
Ahmedabad in West India has some major developers coming up with large-scale, high-quality retail projects. This year, Charles Tyrwhitt opened its first store in India at Palladium Ahmedabad.
Amritsar retail real estate landscape is evolving, with increase in institutionally held retail assets.
Coimbatore is one of the key cities driving retail real estate expansion in South India.
Chandigarh growing in retail real estate popularity saw Daiso opening its first store in India at Elante Mall in Chandigarh.
Goa has quite a few developers acquiring land parcels in strategic locations to construct retail projects.
Guwahati is leading the eastern region’s significant supply of 4.5 million sq ft retail space.
Indore is picking up in retail investments as developers capitalize on the lower land costs and growing aspirations of consumers.
Jaipur is seeing a diverse mix of established and emerging regional developers are driving retail real estate supply.
Lucknow is inundated with mid-scale and large-scale malls, significantly enhancing tenant mix and shopper experience in the city.
Ludhiana is one on the key cities driving retail real estate growth in 2024 in Northern India.
Mohali is witnessing a surge in institutional players acquiring assets or partnering for new mall projects in the city.
Surat the diamond city is close on heels of Ahmedabad in the number of new malls opening in 2024.
Thrissur has seen retailers’ confidence bolstered by the availability of quality and premium grade malls in the city.
Trivandrum is witnessing growing retailer confidence due to the influx of high-quality retail mall supply from established developers.
Udaipur in 2024 showcases many new shopping malls that offer a mix of national and international brands.
The Rise of Tier 2 Cities
Tier-II cities are poised to steal the spotlight in India’s real estate landscape. As urban residents seek better living spaces, tier-II cities are redefining the housing market, showcasing not only their economic prowess but also their potential to reshape the national real estate narrative. Year 2025 is poised to be a remarkable year for smaller cities real estate in India. Multiple asset classes expected to thrive on the back of investor and end-user optimism. Notably, alterna- tive asset classes such as data centres, co-living, and senior housing are likely to experience accelerated growth in these cities, driven by a steady shift in demographics, consumer preferences and most importantly the land prices.
Year 2024 could be considered significant for Tier 2 cities globally due to their growing role in economic development, urbanization, and innovation. Here’s why it might be called the “Year of Tier 2 Cities”:
Economic Growth: Tier 2 cities are increasingly attracting investments due to lower operational costs compared to Tier 1 cities. Governments are offering incentives to de- centralize industries and reduce congestion in megacities.
Infrastructure Development: Significant upgrades in transport, smart city initiatives, and connectivity are being prioritized in Tier 2 cities. Enhanced digital infrastructure supports startups and small-to-medium enterprises
Urbanization and Migration: Urban sprawl and high living costs in Tier 1 cities are driving skilled professionals and businesses toward Tier 2 cities, especially in the age of remote working gaining popularity. These cities offer a balance of urban amenities and affordable living.
Cultural Renaissance: Tier 2 cities are becoming hubs for regional art, culture, and heritage, gaining attention as tourism and lifestyle destinations.
Sustainability and Innovation: Smaller cities are more agile in adopting green technologies and policies for sustainable growth. Innovative solutions in waste management, renewable energy, and urban planning, primarily under Smart Cities Mission are often piloted in these cities.
